The Hindu Business Line : October sales numbers drive up auto stocks

Both two-wheeler and four-wheeler manufacturers moved up in today's trading. Hero Honda made a gain of 4.91 per cent, while Tata Motors finished up 3.72 per cent. TVS Motors and Bajaj Auto were also in the gainers' list.

In terms of sales growth, Bajaj Auto led the two-wheeler pack reporting a sales growth of 37 per cent in October 2005 against October 2004. M&M posted an impressive growth of 23.70 per cent. Tata Motors recorded a growth of 17.16 per cent.

According to Mr Gul Tekchandani, a market strategist, medium to long-term outlook for auto stocks appears good in view of the escalation in manufacturing activity, strong GDP growth expectation and progress in the road projects. "A relatively low interest rate regime also has been helping auto sector sales numbers," he added. According to Mr Arun Kejriwal, a market analyst, though sales growth has been very positive and expectation of continuation of this trend is quite strong in the remaining part of this fiscal, competition is putting pressure on the margins.

"In the four-wheeler space, a number of unlisted manufacturers are showing a sizeable market share growth, putting profitability growth under check for the listed ones," Mr Kejriwal explained.

Mr Mukesh Modi of Anagram Stockbroking, however, felt that outlook for the sector remains positive due to change in product mix and surge in demand in the domestic market. "Margins of auto companies are expected to improve in the coming quarters because of lower steel prices, one of the main inputs," he said.

According to Mr Rajesh Agarwal, October being a festive month, sales figures were expected to be good. "Sales of cars and multi-utility vehicles had eased between April and August 2005. New foreign car makers have made the competition hot in the four-wheeler space. Two-wheeler makers, however, seem relatively better off," he added.

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